Crop loan at 5% interest for farmers, farm credit up by 16%

New Delhi: In a bonanza to farmers, the government on Friday announced a subsidised 5% interest rate on crop loans on timely repayment, while proposing a 15% hike in credit made available for farm sector.

This would be as a result of finance minister proposing to hike to 2% the interest subvention provided to farmers, giving them at an effective rate of 5% per annum. Farmers get crop loan of up to Rs3 lakh at 7%.

Watch videos, play the budget game, and find out how the budget affects you. All that and more on Livemint.com’s exclusive Budget 2010 microsite. (Click here)

In his Budget speech for 2010-11, finance minister Pranab Mukherjee also allocated Rs400 crore to raise farm production in the eastern parts of India, comprising Bihar, Chhattisgarh, Jharkhand, eastern UP, West Bengal and Orissa.

“In the last Budget, I provided an additional 1% interest subvention as an incentive to those farmers who repay their short-term crop loan as per schedule. I propose to raise this subvention for timely repayment of crop loan from 1% to 2% for 2010-11,” he said.

Noting that banks are consistently meeting the targets set for agriculture credit flow in past few years, Mukherjee said that for 2010-11, target has been raised to Rs3,75,000 crore from Rs3,25,000 crore in the current year.

In view of drought and severe floods in some parts of the country, he extended the period for repayment of loan amount by farmers under the Rs71,000 crore debt waiver scheme by six months till 30 June 2010.

To give impetus to food processing, Mukherjee said five more mega food parks would be established to provide latest infrastructure facilities, in addition to the 10 already being set up.

Mukherjee said that external commercial borrowings would be available for cold chain sector for preservation or storage of agricultural and allied produce, marine products and meat.

“Changes in the definition of infrastructure under the ECB policy are being made,” the minister added. ECB is a form of debt raised overseas.

Listing the four-pronged strategy to spur growth in the farm sector, Mukherjee said the government would focus on raising agriculture production, reduction in wastage, credit support to farmers and thrust to the food processing sector.

“The first element of the strategy is to extend the green revolution to the eastern region of the country comprising Bihar, Chhattisgarh, Jharkhand, eastern UP, West Bengal and Orissa, with the active involvement of gram sabhas and the farming families. For the year 2010-11, I propose to provide Rs400 crore for this initiative,” he said.

The finance minister proposed to organise 60,000 “pulses and oil seed villages” in non-irrigated areas during 2010-11, in order to raise output of pulses and oilseeds where there is a deficit and country is dependent on import.

For this purpose, he has provided Rs300 crore in the Budget and said the initiative will be an integral part of the Rs25,000 crore Rashtriya Krishi Vikas Yojana.

This fund will benefit states like Punjab and Haryana which were the centre of action during green revolution but due to excessive use of chemicals and fertilisers, the soil condition has deteriorated over the years.

Pointing out that there is wastage of grains procured for buffer stocks due to acute shortage of storage capacity, he said that the government has extended the guarantee period given by Food Corporation of India to private parties for hiring godowns to seven years from the current five years.